S T R I C T LY
P R I VAT E
AN D
C O N FI D EN TI AL
SEPTEMBER 2008
ASIA BOND TRENDS
English_General
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Asia's sovereign bond issuance has peaked…
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While rest of the world has accelerated
International bonds issued by governments, outstanding amounts
USD bn
2500
60
Asia
50
2000
40
1500
30
Rest of world
1000
20
500
10
0
0
93 94
95 96 97
98 99
00 01 02
03 04 05
06 07
08
Asia's share of the total sovereign bond market has collapsed
Share of Asian sovereign bonds in total
percent
4.0
3.5
3.0
2.5
2.0
1.5
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
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Asian governments issuing a lot more domestic debt…
RoW stayed on trend
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Domestic government securities outstanding
USD trillion
30
3.0
25
2.5
Rest of world
20
2.0
15
1.5
Asia
10
1.0
5
0.5
0
0.0
94
95
96
97
98
99
00
01
02
03
04
05
06
07
Asia's share of total local currency securities has grown
substantially, but still a small share
Asia's share of outstanding domestic government debt
percent
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
94 95 96 97 98 99 00 01 02 03
04
05
06
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07
Key EM Asian countries have significantly expanded local
issuance
Domestic and overseas sovereign debt securities: ID, MY, PH & TH
USD bn
350
300
250
200
Domestic
150
100
Overseas
50
0
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
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EM Asia has substantially reduced their reliance on
international markets
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Share of overseas securities in total outstanding: ID, MY, PH & TH
percent
22
20
18
16
14
12
10
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
But foreign money has followed the issuers home,
particularly in Malaysia and Indonesia
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Foreign ownership of domestic government bonds
percent of total
30
25
20
Indonesia
15
10
Malaysia
5
0
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Total foreign ownership is about $10-12bn in both Indo
and Malaysia
Foreign ownership of domestic government bonds
USD bn
18
16
14
12
10
Indonesia
8
6
Malaysia
4
2
0
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07 Jul-07
Jan-08
Jul-08
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Perhaps the currency trend explains this seeming
'structural' shift?
Foreign ownership of domestic government bonds: Indonesia
USD bn
14
12
USD/IDR
8600
8800
9000
9200
9400
9600
9800
10000
10200
10400
USD/IDR
10
8
6
Foreign ownership
4
2
0
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
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Jul-08
The trend is consistent in Malaysia as well:
just a coincidence?
Foreign ownership of domestic government bonds: Malaysia
USD bn
USD/MYR
3.0
18
3.1
16
3.2
14
3.3
12
USD/MYR
3.4
10
3.5
8
3.6
6
Foreign ownership
3.7
4
3.8
2
3.9
0
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08
What if the FX markets undergo a structural shift?
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Markets which have well-developed local demand base
Share of government bonds owned by long-term domestic investors
percent
16
14
80
12
10
75
8
6
4
Malaysia
70
Indonesia
65
2
0
Apr-01
85
Sep-02
Jan-04
May-05
Oct-06
Feb-08
60
Jul-09
 At the long end, Indonesia is still gradually improving
 Malaysia has robust demand source, but insurers and pension funds have ceded market-share to foreigners
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Demand from banks has slowed substantially
Share of government bonds owned by banks
percent
100
19
17
90
15
Malaysia
80
13
70
11
60
Indonesia
9
50
40
Apr-01
7
Sep-02
Jan-04
May-05
Can this demand be re-ignited?
What would that imply for credit availability?
Oct-06
Feb-08
5
Jul-09
Sources of demand in Indonesia are clearly very skewed,
and heavily dependent on foreigners
Pattern of demand for domestic government bonds: Indonesia
IDR tn
Net issuance
80
60
40
20
0
-20
-40
-60
2004
2005
2006
2007
Foreigners
Others
Series5
2008*
Banks
LT Investors
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The sources of demand are slightly better in Malaysia,
foreigners still the largest players in recent times
Pattern of demand for domestic government bonds: Malaysia
MYR bn
Net issuance
25
Foreigners
Banks
Others
LT Investors
20
Series5
15
10
5
0
-5
-10
2005
2006
2007
2008*
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